Should I Avoid Chart Industries, Inc. (GTLS)?

In this article we will analyze whether Chart Industries, Inc. (NASDAQ:GTLS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Chart Industries, Inc. (NASDAQ:GTLS) was in 19 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. GTLS shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 26 hedge funds in our database with GTLS positions at the end of the fourth quarter. Our calculations also showed that GTLS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Chart Industries, Inc. (NASDAQ:GTLS).

Do Hedge Funds Think GTLS Is A Good Stock To Buy Now?

At first quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GTLS over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GTLS A Good Stock To Buy?

More specifically, Fisher Asset Management was the largest shareholder of Chart Industries, Inc. (NASDAQ:GTLS), with a stake worth $153.3 million reported as of the end of March. Trailing Fisher Asset Management was Driehaus Capital, which amassed a stake valued at $61.7 million. GAMCO Investors, ExodusPoint Capital, and Bourgeon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Bourgeon Capital allocated the biggest weight to Chart Industries, Inc. (NASDAQ:GTLS), around 2.48% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, setting aside 1.65 percent of its 13F equity portfolio to GTLS.

Judging by the fact that Chart Industries, Inc. (NASDAQ:GTLS) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that elected to cut their entire stakes heading into Q2. Interestingly, Lee Ainslie’s Maverick Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $34.2 million in stock, and Principal Global Investors’s Columbus Circle Investors was right behind this move, as the fund dumped about $33.8 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds heading into Q2.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Chart Industries, Inc. (NASDAQ:GTLS) but similarly valued. We will take a look at Cabot Microelectronics Corporation (NASDAQ:CCMP), CoreSite Realty Corp (NYSE:COR), Descartes Systems Group (NASDAQ:DSGX), TriNet Group Inc (NYSE:TNET), Helen of Troy Limited (NASDAQ:HELE), The Ensign Group, Inc. (NASDAQ:ENSG), and Spirit AeroSystems Holdings, Inc. (NYSE:SPR). This group of stocks’ market valuations are similar to GTLS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCMP 19 281932 -3
COR 15 173361 1
DSGX 11 274653 -1
TNET 24 389265 3
HELE 29 214080 10
ENSG 13 87836 -6
SPR 44 1120191 3
Average 22.1 363045 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $297 million in GTLS’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Descartes Systems Group (NASDAQ:DSGX) is the least popular one with only 11 bullish hedge fund positions. Chart Industries, Inc. (NASDAQ:GTLS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GTLS is 32. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately GTLS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GTLS investors were disappointed as the stock returned 4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.